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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM
Date of Hearing : 15.10.2018 : 22.10.2018 Date of Pronouncement O R D E R Per Shamim Yahya, A. M.: These appeals by the assessee are directed against the common order of the learned Commissioner of Income Tax (Appeals)-34, Mumbai (‘ld.CIT(A) for short) dated 21.11.2017 and pertains to the assessment years (A.Y.) 2009-10 to 2011-12.
ITA number
The issue raised is that ld. CIT(A) erred in sustaining disallowance of 12.5% of bogus purchase amounting to Rs.5,61,280/- for A.Y. 2009-10, Rs.5,93,542/- for A.Y. 2010-11 and Rs.9,36,462/- for A.Y. 2011-12.
Since the facts are common and connected, I am referring to the facts and figures from A.Y. 2009-10.
Brief facts of the case are as under:
Assessment Year 2009-10 (I.T.No. 116) has been taken as lead year. The Return of Income in this case was filed on 27.09.2009 declaring total income of Rs.8,15,510/-.
Subsequently, the A.O. received information from Sales Tax Department and also from the office of DGIT (Inv), Mumbai that the appellant is a beneficiary of accommodation Bills of purchases from certain bogus Hawala Dealers. As per the information, the concerned Hawala Dealers had not sold any goods, but it had given accommodation entries of sales to the appellant. As per the assessment order, the details of the bogus purchases from the supplier as claimed by the assessee is as under:
Sr. No TIN No. Name of the entity PAN Amount (Rs.)
27640405056V Laxmi Sales Corporation ACCPC8910H 79,560 2. 27680584387V Bhakti Enterprise AVUPS4656H 10,00,121 3. 27849642014V Hariom Traders ADMPL1842L 15,80,150 4 27380604146V Purab Enterprises BJYPS4594M 18,30,405 TOTAL 44,90,236
Accordingly the AO recorded his reasons to believe and issued notice u/s. 148.
Notice u/s. 143(2) and 142(1) of the Act were issued and duly served on the assessee.
During the reassessment proceedings, the A.O. requisitioned complete details with respect to purchases particularly the purchases from suspicious dealers. The assessee provided certain details such purchase bills, copy of ledger account etc. It was also claimed that the payments have been made through banking channels. Subsequently, the A.O. attempted to verify the genuineness of such purchases u/s. 133(6) of the Act.
However, all these verification letters came back with the remark 'Refused/Left'. The A.O. further referred this issue to the assessee asking him to conclusively establish the genuineness of the purchases claimed through the parties which have already been placed in the list of suspicious dealers by the Sales Tax Department. The A.O. refused to take the argument like cheque payment, bills, invoices, ledgers etc as a conclusive proof for genuineness of payment. Relying on certain case laws, the Assessing Officer finally concluded that the purchases from the above mentioned hawala dealers are not genuine and as per the ratio of judgement in the case of Vijay Protein Ltd. 1996 58 ITD 428 (Ahmedabad), 25% of such purchases was disallowed.
Against the above order assessee appealed before the ld. CIT(A). The ld. CIT(A) restricted the addition of 12.5% of the bogus purchase.
Against the above order of the ld. CIT(A), the assessee is in appeal before the ITAT.
I have heard the ld. Departmental Representative (ld. DR for short). A request for adjournment was moved on behalf of the assessee. The same is rejected as the issue of bogus purchase has already been dealt with in a catena of cases.
I find that credible and cogent information was received in this case by the assessing officer that certain accommodation entry provider/bogus suppliers were being used by certain parties to obtained bogus bills. The assessee was found to have taken accommodation entry/bogus purchase bills during the concerned assessment year from different parties. Based upon this information assessment was reopened.
The credibility of information relating to reopening remains un-assailed. In such factual scenario, the assessing officer has made the necessary enquiry. The issue of notice to the party has returned unserved. Assessee has not been able to provide any confirmation from any of the party. Assessee has also not been able to produce any of the party. Necessary evidence relating to transportation of the goods was also not on record. In this factual scenario, it is amply clear that the assessee has obtained bogus purchase bills. Mere preparation of documents for purchases cannot controvert overwhelming evidence that the provider of these bills is bogus and non-existent.
The Sales Tax Department in its enquiry has found the parties to be providing bogus accommodation entries. The assessing officer also issued notices to these parties at the addresses provided by the assessee. All these notices have returned unserved. Assessee has not been able to produce any of the parties. Neither the assessee has been able to produce any confirmation from these parties. In such circumstances, there is no doubt that these parties are non-existent. We find it further strange that assessee wants the Revenue to produce assessee’s own vendors, whom the assessee could not produce. The purchase bills from these non-existent/bogus parties cannot be taken as cogent evidence of purchases. In light of the overwhelming evidence, the Revenue authorities cannot put upon blinkers and accept these purchases as genuine. This proposition is duly supported by Hon’ble Apex Court decision in the case of Sumati Dayal vs. CIT [1995] 214 ITR 801 (SC) and CIT vs. Durga Prasad More [1971] 82 ITR 540 (SC). In the present case, the assessee wants that the unassailable fact that the suppliers are non-existent and, thus, bogus should be ignored and only the documents being produced should be considered. This proposition is totally unsustainable in light of Hon’ble Apex Court decisions.
I further find that Hon'ble jurisdictional High Court in the case of Nikunj Eximp Enterprises (in Writ petition no 2860, order dt. 18.6.2014) has upheld 100% allowance for the purchases said to be bogus when the sales have not been doubted.
However, the facts of that case were different. Furthermore, the sales in that case were basically to government departments. Hence, the ratio from this decision is not fully applicable on the facts of the case.
In these circumstances, the learned Departmental Representative has referred to Hon’ble Gujarat High Court decision in the case of Tax Appeal No. 240 of 2003 in the case of N K Industries vs. Dy. CIT vide order dated 20.06.2016, wherein 100% of the bogus purchases was held to be added in the hands of the assessee and tribunals restriction of the addition to 25% of the bogus purchases was set aside. It was expounded that when purchase bills have been found to be bogus, 100% disallowance was required. The special leave petition against this order along with others has been dismissed by the Hon’ble Apex Court vide order dated 16.1.2017.
I further note that Hon’ble Rajasthan high court has similarly taken note of decisions of the apex court on the issue of bogus purchases in the case of CIT Jaipur vs Shruti Gems in of 2009. The Hon’ble High Court has referred to the decision of CIT Jaipur vs. Aditya Gems, D. B. in ITA No. 234 of 2008 dated 02.11.2016, wherein the Hon’ble Court had inter alia held as under:
"Considering the law declared by the Supreme Court in the case of Vijay Proteins Ltd. Vs. Commissioner of Income Tax, Special Leave to Appeal (C) No.8956/2015 decided on 06.04.2015 whereby the Supreme Court has dismissed the SLP confirmed the order dated 09.12.2014 passed by the Gujarat High Court and other decisions of the High Court of Gujarat in the case of Sanjay Oilcake Industries Vs. Commissioner of Income Tax (2009) 316 ITR 274 (Guj) and N.K. Industries Ltd. Vs. Dy. C.I.T., Tax Appeal No.240/2003 decided on 20.06.2016, the parties are bound by the principle of law pronounced in the aforesaid three judgments.
However, I note that this is not an appeal by the Revenue. Hence, it will not be appropriate to consider and take away the relief already granted by the Assessing Officer and ld. Commissioner of Income Tax (Appeals) to the assessee. Hence, I confirm the order of ld. CIT(A).
In the result, this appeal filed by the assessee stand dismissed.